Some jottings on Pulak’s book

Biased views on the book closest to my heart, Darwin, evolutionary biology and Nalanda's approach to investing.

Pulak’s book – What I Learned About Investing from Darwin – released earlier this week. It articulates Nalanda’s investment thinking through the lens of evolutionary biology. Kindle edition is available (https://amzn.eu/d/73kWhq4), with a hardcopy edition expected shortly. Unfortunately, a separate Indian edition with India pricing will take a few months.

Since I’ve learnt all my investing from Pulak and have been his accomplice for 16-years, I’m too biased to review this book. I don’t want to summarize it either, as I’ll do injustice. However, I’m too excited about it to not say anything. And, like with all of Pulak’s quarterly investor letters, I’ve read the book twice already (and lived it once). So, let me share a hotchpotch of thoughts on the book.

An Indian practitioner’s comprehensive view

In my experience, investing can only be learnt from practitioners, preferably successful ones whose thought process and actions are clearly and comprehensively observable. Unfortunately, the best Indian investors don’t offer this visibility into their inner workings. They write too little, rarely writing regularly, let alone comprehensively in book form. While many do interviews, the format is way shallower than the written word. While Western investors share more, differences in context reduce relevance. For example, the #1 risk in India (promoter) is hardly a factor in Western context with diversified ownership and board-led governance.

Having invested in India for over a quarter century, Pulak shares every element of his investment thinking, in detail and with examples. Across a range of topics - primacy of ROCE as a metric, distinguishing reliable signals from unreliable ones, risks that are best avoided altogether – everything comes from decades of practice in the Indian context. It is my hope that seeing this book nudges other Indian practitioners to share their approaches more systematically and comprehensively.

A window into the fascinating and surprisingly relevant world of evolutionary biology

If you’re a fellow investor, the investing part of this book may be old hat (separately, there’s nothing new to sensible investing but more on that later). However, if you’re from one of the standard backgrounds that led into investing and business jobs, you’re unlikely to have delved deep into evolutionary biology. I certainly haven’t. I know little about the topic, despite having read 16-years of Pulak’s quarterly letters with analogies between investing and evolution. However, seeing evolutionary lessons come together in book form in once place, I better appreciate their relevance to investing and life.

Investors are supposed to learn from history. Each of us has studied a reasonable amount of business history, if not human history. Evolutionary biology is simply the broadest history available, the history of all all life on Earth for all time. It covers the most universal of all struggles, to survive and thrive amidst an adverse environment. That life is still around and abundant after a few billion years vouches for the efficacy of evolution. Why wouldn’t we learn from the most successful approach over the longest period of time for tackling the most universal of our problems? As a bonus, when short-termism is a major problem for investors, anchoring to a process that functions on glacial timescales helps nudge us towards longer term thinking.

A better appreciation of an underrated role model

Darwin wasn’t the smartest scientist in history. Not even close. However, he was the most rational human in all of history. Again, not even close.

Behavioural science is popular. It is essentially about being aware of our own limitations, the tricks our minds play on us and our futile attempts to compensate for the same. On this front, Darwin is the OG. He had a freakish level of self-awareness and intellectual honesty. He was his worst critic, constantly probing his own work for flaws and seeking falsifying evidence for his theories. He wrote entire chapters on what could prove him wrong. As evolution is responsible for human nature, it is fitting that evolution’s pioneer is the role model for helping us overcome the frailties that come with human nature.

Pulak’s book helps us better appreciate Darwin. Not merely is Darwin in the title and quotes at the start each chapter, his spirit is pervades the entire book. However, the real hat-tip to Darwin is that the bedrock of Pulak’s investing approach is an explicit acceptance of how clueless we are in figuring out the world around us.

(As with all essays, I first sent it to Pulak & he flagged the sentence italicized above as most important)

Not about what’s new, but about reinforcing what’s timeless.

There’s nothing new to sensible investing, since there’s nothing new to common sense. Graham, Munger and Buffett have said it all. Pulak is the first to acknowledge this. In fact, each chapter starts with a Buffett quote. However, not forgetting the old has been surprisingly hard for investors. This is best seen in every bubble we fall for, despite it being a rehash of the same movie. There’s no philosophical difference between latest crap-tech froth and land-tech froth that prevailed when Nalanda got started. Yet, even those of us who lived through prior bubbles forget timeless lessons exactly when we need them most.

While the evolution part of Pulak’s book is likely new to most investors, the investing part isn’t. However, the timeless can always use help in sticking better. Conveying the timeless through a novel, fascinating evolutionary lens helps. Distilling the timeless into a small set of core principles helps. Transparently sharing lived experience in the Indian context helps. Disproportionate emphasis on what’s usually skimmed over helps (one of three sections is entirely about avoiding ruin). Getting validation from a credible practitioner that it’s ok to ignore macro, forecasts and other noise helps. You get the drift – this book helps timeless investing lessons stick better.

I first met Pulak in late-2006, as a clueless noob, flailing disastrously in investing. Through learning from him and working at Nalanda, I reoriented my investment thinking towards an approach that, at its core, focused on being less stupid and doing less harm. First, survive; rest is detail. On Nalanda’s fifteenth anniversary in 2022, our first thought was “Hey, we’re still around”. I couldn’t have managed this reorientation towards a safer and better way to invest on my own, without help. While there is no substitute for an apprenticeship, I am glad that what was of immeasurable help to me is now available more broadly. Hence, I excitedly pen this needless note.